Business & Economy

Fresh Covid-19 outbreaks affect growth in China’s manufacturing sector

Shanghai, China, Jan 31 (efe-epa).- The Chinese manufacturing industry in January witnessed a 0.6 percent slowdown in its benchmark Purchasing Managers’ Index (PMI) indicator, which stood at 51.3 points, weighed down by fresh Covid-19 outbreaks.

Nonetheless, according to monthly data released by the National Bureau of Statistics, the PMI shows growth in the sector for the 11th consecutive month, as an index reading above 50 signifies expansion, while a reading below this means contraction.

The figure is slightly lower than the forecast by analysts, who had expected the PMI to be around 51.6 points in the first month of 2021, although it continues to underpin the sector’s recovery after the massive slump in February 2020, when industry came to a standstill due to Covid-19.

The downturn resulted in the indicator reaching its lowest-ever figure, of just 35.7 points, even worse than the 38.8 points recorded in November 2008 during the global financial crisis.

In January large companies registered a 0.6 percent drop and stood at 52.1, while medium-sized industries contracted even more, by 1.3 points, to close at 51.4.

Small enterprises continued to register negative growth with a reading of 49.4, although this figure was 0.6 points higher than the previous month.

As with December, production and new orders, two of the five sub-indices that make up the manufacturing PMI, stayed above the 50-point threshold, while employment, raw material supplies and supplier delivery time remained in th negative.

The NBS also released the PMI for non-manufacturing businesses, which stayed above 50 despite plummeting by 3.3 points to 52.4, the lowest reading since March 2020.

The March figure had at the time marked the beginning of a recovery after the crash in February (29.6 points).

The latest downturn has been caused by new Covid-19 outbreaks registered in China throughout January, raising the daily number of cases to their highest levels in six months just ahead of the Lunar New Year, a traditional holiday and shopping season in China.

This also explains why the index of expected economic activity, which measures the confidence of non-manufacturing companies in future market development, dropped from 60.6 points in December to 55.1 points in January.

The comprehensive PMI production index, combining manufacturing and non-manufacturing industries, fell by 2.3 points to 52.8, its worst performance in the last 12 months except February 2020.

In a statement on the NBS website, its statistician Zhao Qinghe blamed the Covid outbreaks for the slowdown in industrial growth, especially in the services sector, but highlighted other contributing factors in the case of manufacturing, such as the end of the Christmas season, which boosts overseas demand of Chinese products every year. EFE


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